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European Carbon Prices and Banking Restrictions: Evidence from Phase I (2005-2007)

Emilie Alberola and Julien Chevallier

Year: 2009
Volume: Volume 30
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No3-3
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Abstract:
The price of European Union Allowances (EUAs) has been declining at far lower levels than expected during Phase I (2005-2007). Previous literature identifies among its main explanations over-allocation concerns, early abatement efforts in 2005, and possibly decreasing abatement costs in 2006. We advocate low allowance prices may also be explained by banking restrictions between 2007 and 2008. Based on a Hotelling-CAPM analysis, we provide statistical evidence that the French and Polish decisions to ban banking contribute to the explanation of low EUA Phase I prices. Besides, we provide the first rigorous empirical verification that the cost-of-carry relationship between EUA spot and futures prices for delivery during Phase II does not hold after the enforcement of the inter-period banking restrictions. This situation may be interpreted as a sacrifice of the temporal flexibility offered to industrials in Phase I to correct design inefficiencies, and achieve an efficient price pattern in Phase II.



On the CO2 Emissions Determinants During the EU ETS Phases I and II: A Plant-level Analysis Merging the EUTL and Platts Power Data

Benoît Chèze, Julien Chevallier, Nicolas Berghmans, and Emilie Alberola

Year: 2020
Volume: Volume 41
Number: Number 4
DOI: 10.5547/01956574.41.4.bche
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Abstract:
This article studies ex-post the CO2 emissions determinants during 2005�2012 by resorting to an original database merging the European Union Transaction Log (EUTL) with the World Electric Power Plants (WEPP) database maintained by Platts. We estimate the main drivers of CO2 emissions for the 1,453 power plants included in the EU ETS using plant-level panel data. During phases I and II, there has been a debate about whether the economic crisis was ultimately the only factor behind the fall in CO2 emissions. We find that the EU ETS kept some degree of effectiveness but only during phase I (2005�07). During phase II (2008�12), its impact has been largely impeded by the deep economic recession in 2008�2009 which became the leading cause of the emissions reduction. We disentangle the analysis not only by periods but also for each type of power plants. We conclude that the EU Commission�s flagship climate policy could and should be enhanced by better coordination of overlapping climate policies.





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